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January 13, 2009

Sports bailout: The drumbeat continues

More on difficulties teams are having financing stadiums amid the economic collapse, and their hopes for the government to ride to their rescue. From Sports Business Journal:

The sullen economy and tight credit markets have made it difficult for teams and municipalities to borrow money to fund projects, which in effect has everybody in the facilities industry searching for answers....

"The problem is if you're not credit-worthy or have creative financing, you won't get a project underwritten today," said Chris Dunlavey, a Washington, D.C.-based consultant. "Private packaging sustained by revenues of a project are being completely disregarded these days."

And then, inevitably, we arrive at the calls for the cavalry to come to the rescue, from a familiar source:

Teams and facility developers acknowledge that sports takes a back seat to the dramatic fallout in other business sectors. However, they are encouraged with President-elect Barack Obama's push for public infrastructure improvements across the country, developments they feel could create momentum for their own projects.

"The bond markets drying up is not a baseball issue but a nation issue," said David Samson, president of the Florida Marlins, a team that spent the past 10 years trying to get a deal done before getting the green light to start building a new ballpark this year. "We don't view that as a risk. If that happens, the Marlins will be the last thing on anybody's mind."

That makes about as much sense as most things Samson has said, but it's still worrisome that the meme of a sports bailout seems to be picking up speed.

The Phoenix Coyotes, meanwhile, are apparently still trying to recoup the $2.70-a-ticket surcharge that is the only revenue the city of Glendale gets in exchange for putting up $180 million of the $220 million cost of the team's arena. (Rent? A share of arena revenues? Get real!) With the Coyotes leveraged up to their ears in debt, though, and hockey commentators openly talking about the team folding, they may actually get a hearing for throwing good public money after bad.

The New York Times hockey blog has a good rundown of the Coyotes mess, which unfortunately goes awry at the end in trying to argue that NHL teams have moved to the U.S. in increasing numbers not because of the league's desire to expand into the Sun Belt, but because they "outgrew" their original hometowns, and were beset by rising player salaries:

To cover those escalating salaries, owners needed new revenue. Since hockey was an arena-based gate-receipts business - as it always has been and continues to be - the owners found that they needed more seats, more amenities, more luxury boxes and, yes, even better parking revenue. Many owners got those things. Not all did.

Norman Green, the North Stars owner, issued the ultimatum and was the first to make good on it, in 1993. Unable to coerce a new deal out of the Twin Cities (and with his local mall business failing and facing a sexual harassment suit in the Minnesota courts), he packed up his team and headed to Dallas. Other teams followed, each with their own local twists, turns and absurdities.

In the case of the Jets/Coyotes, there was political wrangling galore and ever-shifting demands from the Jets owners, led by Winnipegger Barry Shenkarow. The public, some politicians and some in the business community exhausted all avenues to save the Jets. But the civic and commercial forces in Winnipeg could not make it work, and perhaps Shenkarow would never have relented anyway.

The problem with this argument is that even with "more seats, more amenities, more luxury boxes," most new arenas wouldn't have made money overall - if not for government subsidies so that the teams could reap the benefits of those new amenities without worrying their little heads about construction debt. The NHL's shift southward, then, has less to do with greedy players or with Sun Belt colonialism than with the fact that unlike Canada, U.S. cities were willing and ready to build lavish new facilities with public money. For no compensation beyond a piddly $2.70 per ticket.

Canada's record isn't so squeaky clean. See 'Skydome' or 'Rogers Centre'. Also, dont quote me on these exact figures, but the city, provincial and federal government are ponying up some $40 million for a new stadium for the Blue Bombers in Winipeg. David Asper is putting up $100 million, and in exchange he gets to own the team (currently publicly owned), and is given the lands that the current stadium sits on, so his development company can do with as they please.

I'm not necessarily against this, but Canada's practices are not that far off of America's.

Posted by proud_canadian on January 13, 2009 07:20 PM

Skydome and the Big Owe are certainly bad, but Canada's record of sports subsidies still pales in comparison to its southerly neighbor. For starters, teams almost always pay property taxes in Canada, which is unheard of in the States - you may recall the threats to make a NAFTA case out of this.

Posted by Neil on January 13, 2009 07:46 PM

That's a good point on the property taxes. As a Montreal Canadiens fan, I know the city bends that team over. I've heard they pay more to the city as a team, then all other NHL teams combined or some outrageous stat. The 'Bell Centre' was entirely privately financed.

Take into account as well that it may seem like Canada pales in comparison as, aside from Toronto, Canadian cities only have to worry about supporting 1 major league team, the NHL. in cities like Chicago, St.Louis, Detroit etc. They have to provide 3 'big league' facilities (NBA and NHL typically share) so more money is getting thrown around.

Most major Canadian cities have a CFL team and governemnt money has gone into stadium upgrades in Montreal, Regina, Winnipeg (as listed above). I find the backlash isn't as great for this league comapred to hockey because the government and the people tend to also sees it as an investment in canadian heritage. the CFL has been around for almost 100 years. Also, and more importantly the avearge salary in the CFL is about CDN$50 000 so it's not seen as a handout for millionaires to ply their trade (save the owners). Most owners would never pony up 30-40 million for stadium upgrades, unless they got some sort of deal like the asper one, who got prime land in exchange.

Ultimately, I agree the subsidies pale in comparison, but they still seem to be taking place. We just dont have as many 'hand-outs' to hand out.